Market Overview

17 February 2021

The Dollar Left Treasuries Loose

Traditionally one of the major indicators for how the U.S. Dollar may move is the movement in U.S. Treasuries, but the connection between the two has been seen to weaken lately.

Such a correlation between the two is evident as Treasuries are a “Gold standard” for safe haven bonds with an ultimate security level. Any investments in Treasuries could be compared with having cash in your hands. So, any rise of Treasuries’ yields that enable for the creation of additional profits without any seeming risks could ignite additional demand for the Greenback and that could lead to its strengthening. 

The dynamics of the yield curve is not only seen as a gauge for the global bond market, but for the entire financial market. So, traditionally the rise in U.S. Treasuries’ yields signals a strengthening of the Greenback. It is considered to be a kind of rule of thumb for investors, or at least it was.

This relation between the two has seen to break down in recent months. The 10-year benchmark U.S. Treasuries’ yield soared from 0.5% in August 2020 to 1.328% on Wednesday morning, while at the same time the U.S. Dollar index plummeted from 94 points to 90.78. From the end of January 2021 yields of the 10-year bond rocketed from 0.99% to almost 52 weeks’ highs, or by a third in less than three weeks. Yields even returned to pre-pandemic levels. Meanwhile, the U.S. Dollar index has almost been unchanged since the end of January and has remained within the 90-91 point range.

Such paradox shows the true nature of the modern financial market misbalances, and a balance of inclination to risks and their aversion. Rising U.S. Treasuries yields can be seen as a symptom of the Federal Reserve (Fed) ultra-loose monetary policy with unprecedented money printing and new stimulus measures from Joe Biden’s administration, which has the support of Congress. This is seen to rise risk on sentiment in the market. Mass vaccination in developed countries fuels business activity and economic recovery.

On the other hand, the Greenback is considered to be a safe haven asset too. So, when the appetite for risk is rising the U.S. Dollar is less popular to invest amid rising volatility.

Besides, expectation of the swift economic recovery and mass vaccination boosted yields of sovereign bonds like Germany, the United Kingdom and some others. So, the rally in U.S. Treasuries’ yields is not leading to adequate rise of the demand and strengthening of the Greenback itself. 

Traders may want to consider a new reality while trading currency majors that has the U.S. Dollar on one side or the other. The U.S. treasuries’ yields in this regard are no longer a forward-looking indicator in this regard. 

However, such relations may be restored only after major economies return on the pre-pandemic growth track and the U.S. Fed neutral monetary policy is reestablished.


Analysis and opinions provided herein are intended solely for informational and educational purposes and don't represent a recommendation or investment advice by TeleTrade.

Open Demo Account
I understand and accept the Privacy Policy and agree that my name and contact details can be used by TeleTrade to contact me about the information I have selected.
23 International Awards
Have a question?

We are ready to assist you in every step of your trading experience
by providing 24/5 multilingual customer support.

Follow us

Risk Warning: Trading Forex and CFDs on margin carries a high level of risk and may not be suitable for all investors. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 72.72% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Prior to trading, you should take into consideration your level of experience and financial situation. TeleTrade strives to provide you with all the necessary information and protective measures, but, if the risks seem still unclear to you, please seek independent advice.

© 2011-2021 Teletrade-DJ International Consulting Ltd

Teletrade-DJ International Consulting Ltd is registered as a Cyprus Investment Firm (CIF) under registration number HE272810 and is licensed by the Cyprus Securities and Exchange Commission (CySEC) under license number 158/11.

The company operates in accordance with the Markets in Financial Instruments Directive (MiFID).

The content on this website is for information purposes only. All the services and information provided have been obtained from sources deemed to be reliable. Teletrade-DJ International Consulting Ltd ("TeleTrade") and/or any third-party information providers provide the services and information without warranty of any kind. By using this information and services you agree that under no circumstances shall TeleTrade have any liability to any person or entity for any loss or damage in whole or part caused by reliance on such information and services.

TeleTrade cooperates exclusively with regulated financial institutions for the safekeeping of clients' funds. Please see the entire list of banks and payment service providers entrusted with the handling of clients' funds.

Please read our full Terms of Use.

To maximise our visitors' browsing experience, TeleTrade uses cookies in our web services. By continuing to browse this site you agree to our use of cookies.

Teletrade-DJ International Consulting Ltd currently provides its services on a cross-border basis, within EEA states (except Belgium) under the MiFID passporting regime, and in selected 3rd countries. TeleTrade does not provide its services to residents or nationals of the USA.

Material posted here is solely for information purposes and reliance on this may lead to losses. Past performances are not a reliable indicator of future results. Please read our full disclaimer.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 72.72% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.